Tax and Social Assistance

Topics:

• The Disability Tax Credit (DTC)
• ODSP and Social Assistance

The Disability Tax Credit (DTC)

What is the Disability Tax Credit?

If someone in your family has a disability, chances are that you are providing support to him or her, either financially or by providing personal care and supports. In recognition of the additional time, energy, and expenses families commit to their loved ones with disabilities, federal and provincial governments have implemented a regime of tax deductions, credits, and benefits to assist people with disabilities and their family caregivers.

First introduced in 1987, the Disability Tax Credit (DTC) is a Federal Tax Credit (with a corresponding Ontario Provincial Tax Credit) for an individual with a mental or physical impairment that is severe, prolonged, and markedly restricts the basic activity of daily living.

Effective since 2005, eligibility for the DTC now includes the cumulative effect of having significant restrictions of two or more basic activities of daily living that is equivalent to a marked restriction in performing a single basic activity of daily living. The eligibility restrictions for the DTC are discussed in further detail in this section.

The DTC is a tax credit that is available to a person with a disability only. It is also non- refundable (meaning that the individual must pay personal income tax to benefit from the credit). If your loved one with a disability is unemployed and therefore pays no tax, the individual may transfer the credit to a supporting family member earning taxable income. In 2017, the combined federal and provincial Disability Tax Credit amount in Ontario will result in a maximum tax savings of $ 1,632.  (As well, an under 18 disability supplement for DTC eligible minor children may be claimed that could generate an additional $952 in tax savings in 2017.)

Once an individual is DTC eligible, there are many additional benefits and tax credit enhancements available. For example, in 2019, qualified minor children are eligible for the Child Disability Benefit, a monthly benefit worth up to $236.00, which is a supplement to the Canada Child Tax Benefit payment. Another highly valuable benefit that is contingent on DTC eligibility is the qualification to open a Registered Disability Savings Plan (RDSP) and receive government disability saving grants and bonds.

Who qualifies for the DTC?

The Canada Revenue Agency (CRA) administers all tax and benefit programs for the Government of Canada and in particular, the DTC program. The provisions of the Income Tax Act (the “Act”) set out the requirements that must be met in order for an individual to qualify for the DTC. In general, to be eligible to claim the DTC, the person you are supporting must meet the following three requirements:

1. 1. He or she must have a prolonged severe physical or mental impairment;
   2. The effects from the impairment must be such that his or her ability to perform a basic activity of daily living is “markedly restricted”; and
   3. A medical practitioner must certify, on behalf of him or her, that both of the above conditions exist.

You will note that there is no age restriction on who may be eligible for the DTC, but re-qualification will be required in the future.

KEY TERMS AND CONCEPTS

The CRA has established what each of the above three requirements means based on how it defines certain key terms, as set out below:

• “Prolonged” impairment: If an individual’s impairment has lasted or can reasonably be expected to last for a continuous period of at least 12 months, the individual’s impairment is considered prolonged.
• “Markedly restricted”: An individual’s ability to perform a basic activity of daily living is considered to be markedly restricted only if the individual is either blind or unable to perform a basic activity of daily living all or substantially all of the time, even with therapy, the use of appropriate medical devices, and medication. 

• “Basic activities of daily living”: For the purpose of qualifying for the DTC, basic activities of daily living include:
  • • Mental functions necessary for everyday life;
    • Feeding oneself or dressing oneself;
    • Speaking so as to be understood, in a quiet setting, by another person familiar with the individual;
    • Hearing so as to understand, in a quiet setting, another person familiar with the individual;
    • Eliminating (bowel or bladder functions); or

Alternatively, if an individual can perform a basic activity of daily living but requires an inordinate amount of time to perform the activity, the individual is considered to be markedly restricted with respect to that activity.

• “Inordinate amount of time”: An inordinate amount of time generally means that the individual takes a longer amount of time to perform the activity compared to a person of the same age and gender who does not have a restriction in the same activity.
• “Substantially all the time”: The phrase substantially all of the time is not defined in the Act. The CRA has taken the administrative position that substantially all of the time means “at least 90% of the time.” The Tax Court of Canada has emphasized the need for a qualitative approach to determine if a marked restriction of an impairment is present substantially all of the time, and that there is no mathematical formula by which one can determine what “substantially all” means in any particular case.

EXCEPTIONAL CIRCUMSTANCES

The CRA recognises that the precise wording of the three eligibility requirements listed above may exclude certain people who should nevertheless benefit from the DTC. Therefore, the CRA has created a number of additional tests through which these individuals may gain access to the DTC, as follows:

(I) THE “CUMULATIVE EFFECTS” TEST

Oftentimes, individuals suffer from impairment in more than one activity of daily living that, when considered separately, do not meet the criteria under the marked restriction test (i.e., an individual suffers from fibromyalgia that restricts both memory and walking activities). If the effects on each of the activities of daily living is a significant restriction (which is a lower threshold than the “marked restriction” discussed above), the cumulative effect of these significant restrictions is often equivalent to a single marked restriction of an activity of daily living.

(II) THE “LIFE-SUSTAINING THERAPY” TEST

If the individual needs therapy to support a vital function at least three times per week for an average of 14 hours per week, the individual will be eligible to claim the DTC if the medical practitioner certifies to the above therapy requirements in the “Life-Sustaining Therapy” section of the prescribed form.

What is the certification that is required for the DTC?

Practically speaking, in order to qualify, you will need a medical practitioner to complete the CRA prescribed form (the T2201 form; the “prescribed form”). The prescribed form can be found on the CRA website.

On this form, the medical practitioner must confirm the following:

The individual’s impairment: (i) is prolonged where it has lasted or can reasonably be expected to last, for a continuous period of at least 12 months; and (ii) markedly restricts the individual in performing a basic activity of daily living (each basic activity of daily living has its own section in the prescribed form);

The individual’s impairment significantly restricts more than one basic activity of daily living, and the cumulative effects of these multiple restrictions is equivalent to a marked restriction in performing a single basic activity of daily living (under its own section in the prescribed form).

 What benefits are available for DTC Eligibility?

A DTC-eligible individual will be entitled to enhancements to other tax deductions and credits as well as to specific benefits programs. These enhancements and benefit programs are as follows:

ENHANCED TAX CREDITS AND DEDUCTIONS

• • CHILD CARE EXPENSES – An extra $11,000 (for dependent children with disabilities) in expenses for child care services such as nursery, baby-sitting, or boarding at a day camp may be claimed for a child that is DTC eligible.

• • HOME BUYERS TAX CREDIT (FOR INDIVIDUALS WITH A DISABILITY) – A net $750 tax credit is available to a DTC-eligible individual or a supporting family member to purchase a home for the individual in order to accommodate the individual’s personal needs or care.
  • HOME ACCESSIBILITY CREDIT – A DTC-eligible individual may claim a maximum $10,000 tax credit for expenses incurred to renovate a dwelling in order to make it more accessible or reduce the risk of harm.

• • WORKING INCOME TAX BENEFIT (WITB) CREDIT SUPPLEMENT – A refundable annual supplement to the WITB is available to DTC-eligible individuals 19 years of age or older with income from employment or business of at least $1,150.
  • CHILD DISABILITY BENEFIT – A non-taxable monthly supplement on behalf of children that are DTC eligible is available to a family that is eligible for Canada Child Benefit payments.

• • DISABILITY TRANSFER CREDITS – Supporting family members of DTC- eligible individuals with little or no income may claim the disability tax credit.

• • HOME BUYERS PLAN – There are no “first-time buyer” restrictions for DTC-eligible individuals (or supporting family members) to remove funds from an RRSP in order to acquire a dwelling to accommodate the individual’s mobility issues or to meet their personal needs or care.

NOTE: in 2017, the federal government replaced the existing caregiver credit, infirm dependent credit, and family caregiver tax credit with the Canada caregiver credit (“CCC”). The CCC is available in respect of an individual’s spouse or common-law partner, minor child, or relative (the “infirm dependant”) who is dependent on the individual because of a mental or physical infirmity at any time in the year. The infirm dependant does not need to live with individual, but must be dependent on the individual for support by reason of infirmity (the CRA may require documentation in order to show the type of support the individual has provided).  The CCC maximum amount that may be claimed is based both on the income of the infirm dependant and the amount of other tax credits that have been claimed on behalf of the infirm dependent.

TRUST BENEFITS

• QUALIFIED DISABILITY TRUST (QDT) DESIGNATION – A Testamentary Trust for the benefit of a DTC-eligible individual will be taxed at the lower-graduated tax rates rather than the combined top tax rate for individuals. (In Ontario in 2019, the top tax rate is 53.53%.) A further discussion of QDTs is provided in the section on Trusts.
• PREFERRED BENEFICIARY ELECTION – A Trust for the benefit of a DTC-eligible individual may elect to include the income from the Trust into the income of the DTC- eligible person in order to take advantage of the lower marginal tax rates of the individual.

ENHANCEMENT TO MEDICAL EXPENSES

• ATTENDANT CARE EXPENSES – Up to $10,000 ($20,000 in the year of death) in remuneration may be claimed for attendant care for a DTC eligible individual.

BENEFIT SAVINGS PLAN

• REGISTERED DISABILITY SAVINGS PLAN (RDSP) – DTC eligible individuals under the age of 60 are qualified to open an RDSP, and if they are under the age of 50, become eligible for Canada disability savings grants and bonds up to a lifetime maximum of $90,000.

ODSP and SOCIAL ASSISTANCE

What is ODSP?

The Ontario Disability Support Program (ODSP) is a provincial support program that provides social assistance benefits to Ontario residents who have a disability. Funded by the Ontario Ministry of Community and Social Services (MCSS or the “Ministry”), the program offers two broad areas of supports:

1. 1. Income Supports
   2. Employment Supports

The income support component of the program provides financial assistance to qualifying individuals to offset basic needs and accommodation costs.

Who qualifies for ODSP?

To qualify for the Income Supports component of ODSP, you must:

• • Be at least 18 years of age;
  • Be an Ontario resident;
  • Be in financial need; and
  • Meet the program’s definition of a person with a disability or be a member of a Prescribed Class.

The determination of eligibility is a two-step process. First, you or your loved one who has a disability will be required to establish financial eligibility. Only if this criterion is met will MCSS then move on to the stage of determining whether you (or your loved one) meet the program’s definition of a person with a disability. For the purposes of this section, we will refer to “you” as the person with a disability applying for ODSP, though practically speaking, a caregiver or support person (most often a parent) may be the person making the application and providing information to ODSP on behalf of someone with a disability.

How can I tell if I am financially eligible for ODSP?

When determining financial eligibility, an ODSP caseworker will ask you for information related to your household’s basic living expenses, its income, and its assets. Note that your parents’ and siblings’ income and assets are not taken into account, unless they are financially dependent on you. This means that if you are living with your parents or siblings, all of whom have substantial income, this income is not included and does not affect your eligibility for ODSP. However, if you are married or live with a partner, and/or have children who live with you, their income, assets, and expenses will be taken into account for the purposes of ODSP eligibility.

There are various rules associated with what you may earn (i.e., income) and what you may own (i.e., assets) when considering whether you qualify for ODSP, as discussed below.

What does ODSP consider to be income?

Generally speaking, your household expenses must exceed your income in order to qualify for ODSP. As an ODSP recipient, you are allowed to receive income from other sources; however, the impact on your income support benefits will be determined by the amount and source of this income.

Some examples of income that may affect your ODSP income support benefits include:

• • Canada Pension Plan (CPP) or Québec Pension Plan (QPP) benefits;
  • Workplace Safety and Insurance Board (WSIB) benefits;
  • Earnings from a job or training program;
  • Profit from a farm or business, including self-employment;
  • Child, spousal, or sponsorship support;
  • Guaranteed Annual Income Supplement (GAINS);
  • Old Age Security (OAS) and Guaranteed Income Supplement (GIS);
  • Employment Insurance (EI); and
  • Some types of loans.

The above are commonly referred to as “non- exempt” income.

As a recipient of ODSP, however, there are certain types of income that ODSP allows or considers as “exempt” when determining eligibility for benefits. Some examples include:

• • Voluntary gifts or payments of up to $10,000 per 12-month period from any source (this includes payments from Trusts, such as a Henson Trust, and life insurance proceeds);
  • Voluntary gifts or payments (from an individual or from a Trust, such as a Henson Trust) used for disability-related items or services (no limit);
  • Voluntary gifts or payments used for education and training incurred because of disability (no limit);
  • Payments from a Registered Disability Savings Plan (RDSP);
  • Payments from a Registered Education Savings Plan (RESP);
  • Some refundable tax credits; and
  • Court judgments or legal settlements, received as damages or compensation for pain and suffering due to injury or death or a member of the benefit unit.

With regard to income from employment, ODSP allows you to keep the first $200 of your net earnings per month. The remaining income, after childcare and disability-related work costs are deducted, is treated by ODSP on a 50/50 basis: half is the ODSP recipient’s to keep; half is deducted from your income support benefits. You will also receive an additional $100 per month in the form of a work-related benefit. Note that if you are attending high school or post-secondary school full-time, your employment earning will be fully exempt.

For more information related to the treatment of income, please click here.

What assets are considered when applying for ODSP?

ODSP requires that you disclose information with regard to your assets. Some assets may affect your eligibility for income support benefits, while others will be considered exempt.

Generally speaking, you may have up to $40,000 in assets as a single recipient and $50,000 as a couple. The prescribed limit would increase by $500 for each dependent living with you other than a spouse. Note that the Director has the discretion to approve a greater amount, however, approval is given only for items that are necessary to the health of a member of your household or for disability-related items and services.

What are exempt assets for ODSP?

Similar to the way in which ODSP treats income, there are certain assets that are not considered when determining eligibility for income support benefits. Some examples include:

• • A principle residence;
  • Certain types of Trust funds;
  • A Registered Disability Savings Plan (RDSP);
  • The cash surrender value held in an insurance policy up to $100,000;
  • Court judgments or legal settlements, received as damages or compensation for pain and suffering due to injury or death of a member of the benefit unit;
  • One motor vehicle;
  • Student loans; and
  • Pre-paid funeral expenses.

How does ODSP determine disability?

Once your financial eligibility has been established, you must demonstrate that you meet the ODSP definition of a person with a disability. The ODSP regulations determine “disability” based on three criteria, all of which must be met in order to be eligible for ODSP:

1. 1. You have a substantial mental or physical impairment that is continuous or recurrent, and it is expected to last one year or more; and
   2. Your impairment directly results in a substantial restriction in your ability to work, care for yourself, or take part in community life; and
   3. Your impairment, its duration, and restrictions have been verified by an approved health care professional.[1]

Note that the courts have held that the definition of a “person with a disability,” compared with its predecessor and with similar federal legislation, differs. It would appear that the current definition of “person with a disability” in the Ontario Disability Support Program Act (ODSPA) was intended to encompass a broader segment of society and to provide assistance to persons with significant but not severe long-term functional barriers.

If you are a member of a Prescribed Class, you are not required to go through
the disability determination process. Rather, as long as financial eligibility has been established, you would qualify for income support benefits. A list of the prescribed classes provided by MCSS is as follows:

• • A person whose eligibility has been confirmed for services and supports under the Services and Supports to Promote the Social Inclusion of Persons with Disabilities Act, 2008. This process typically takes place through Development Services Ontario.
  • A person who, on May 31, 1998, was a recipient, or the spouse of a recipient, of benefits under specific case classes under the Family Benefits Act, 1992.
  • A person who is 65+ years old and not eligible for Old Age Security (OAS).
  • People who receive either of these disability pension benefits:
    • Canada Pension Plan Disability (CPP-D) benefits
    • Quebec Pension Plan Disability (QPP-D) benefits
  • A person who was a former resident of a Schedule 1 facility under the former Development Service Act (DSA) who ceased to be resident of that facility on or after June 1, 1998. The Schedule 1 facilities under the former DSA include Huronia Regional Centre (Orillia), Rideau Regional Centre (Smith Falls), and Southwestern Regional Centre (Blenheim).
    • Persons residing in one of the following places (but only while residing there):
    • A facility that was a former Provincial Psychiatric Hospital
    • The Centre for Addiction and Mental Health (in Toronto)
    • The Homewood Health Centre (in Guelph)
    • A home licensed under the Homes for Special Care Act
    • An intensive support residence or supported group living residence under the Services and Supports to Promote the Social Inclusion of Persons with Developmental Disability Act[4]

[1] Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B, section 4.

[2] Gray v. Director, Ontario Disability Support Program (2002), 2002 CanLII 7805 (ON CA), 59 O.R. (3d) 364 (C.A.)

[3] Gray v. Director, Ontario Disability Support Program (2002), 2002 CanLII 7805 (ON CA), 59 O.R. (3d) 364 (C.A.)

[4] This list is excerpted directly from the website of the Ministry of Community of Social Services.

How do I apply for ODSP?

An application for ODSP Income Support benefits is made either online, by phone, or in person. If you prefer to apply by phone or in person, you may call or visit your local ODSP office.

To allow for processing, applications should be made at least six months before the person’s 18th birthday. The Ministry’s website suggests that the following information is required to determine financial eligibility:

• • The first name of all family members;
  • Dates of birth of all family members;
  • Immigration status for all family members;
  • Income for all family members;
  • Assets for all family members;
  • Your address;
  • Your housing costs;
  • Cost of expenses (such as child care and disability related work expenses).

The words “family members” as used in the above list refer to the spouse or common law partner and dependent children of the person applying, not to the person’s parents or siblings.

Information from your birth certificate, immigration papers, and tax returns will be required as well. MCSS also recommends that you gather the following documents prior to completing an application[1]:

Once financial eligibility has been established, a Disability Determination Package will be sent to you. There will be sections for you to complete as well as for your health care provider.

Most decisions of the ODSP Director about eligibility or the amount of income support may be appealed. First, you may request an Internal Review of the decision. This involves a review by ODSP to ensure that your application was in accordance with the program’s rules and regulations. If you are unsuccessful, the matter can be appealed to the Social Benefits Tribunal. Further information about the appeal process can be found here.

[1] This chart is excerpted directly from the MCSS website at:

http://www.mcss.gov.on.ca/en/mcss/programs/social/apply_online_documents.aspx

What benefits are available under ODSP?

 (A) INCOME SUPPORT

Once eligibility for ODSP has been established, you will be eligible for monthly income support. The amount of these payments will depend on the size of family, income, assets, and housing costs.

In addition, the amount of support will depend on whether you rent or own your own home, or if you are considered to be living in a “board and lodging arrangement.”

According to ODSP policy, a “board and lodging arrangement” would apply “if you receive food and shelter from the same source.” For example, if you live with your parents and they buy and prepare your meals, you would likely be considered to be in a board and lodging arrangement. If you fall within this category, you would be entitled to $825 per month (for a single person.)

If you rent or own your own home, you will be eligible for a monthly payment comprised of a “basic needs” amount and a “shelter” allowance. Basic needs include food, clothing, and other necessary personal items, with the shelter portion intended to cover your rent
or mortgage payment, heat, utilities (hydro, water), property tax, home insurance, and condominium fees.

Additional allowances are paid to those who have dependents in their care. The recipient and all such dependents (if any) are referred to as the “benefit unit.”

(B) HEALTH-RELATED BENEFITS

If you are deemed eligible for ODSP, then in addition to monthly income support payments, you will also be eligible for various health-related benefits. These include:

• Prescription drug coverage – coverage extends to prescription drugs that are listed on the Ontario Drug Formulary and prescribed by an approved health care professional.
• Dental coverage – you will be eligible for basic dental services as well as additional benefits if your disability, prescribed medications, or prescribed treatments affect your oral health.
• Vision care benefit – ODSP provides coverage for routine eye examinations (not covered by OHIP) as well as prescription eyeglasses and the cost of eyeglass repairs.

You may also be eligible for a pregnancy/ breast-feeding nutritional allowance, as well as extended and transitional health benefits.

(C) DISABILITY-RELATED BENEFITS

As an ODSP recipient, you will be eligible for the provincial Assistive Devices Program (ADP). Through the ADP, you may be able to access:

1. Mobility devices, such as wheeled walkers and wheelchairs;
2. Visual aids, such as magnifiers;
3. Hearing aids;
4. Orthotic or prosthetic devices;
5. Speech devices, such as teletypewriters;
6. Certain medical supplies, such as; ostomy supplies;
7. Respiratory devices.

Depending on the item, the ADP will pay up to 75% of the cost of the device or a fixed amount.

What employment supports does ODSP provide?

In addition to income supports, ODSP provides a wide variety of employment-related supports to individuals seeking employment. Some examples of the available supports include:

• • Help preparing for work;
  • Help finding a job that is right for you;
  • Help keeping a job;
  • Job coaching;
  • On-the-job training;
  • Help to move to the next level in your career;
  • Software and mobility devices that can help you do your job;
  • Interpreter or intervenor services;
  • Transportation assistance;
  • Assistive devices and training to use them;
  • Tools and equipment you need for your job;
  • Special clothing for your job;
  • Specialized computer training.[1]

You can also access employment supports if you are interested in starting your own business. Some of the supports available include:

• • Help to develop and implement a business plan;
  • Training in money management, record keeping, and budgeting;
  • Help with marketing your business;
  • Mentoring;
  • Financial help towards the costs of business tools, equipment and supplies, licenses, and certification;
  • Help getting work-related disability supports, such as assistive devices
    and technical equipment, interpreter, intervenor, reader, and notetaker services.[2]

ODSP connects interested ODSP recipients with a local service provider that specializes in self-employment. For more information, we recommend contacting your local ODSP supports office and/or visiting the Ministry’s website.

[1] This list excerpted from the website of the Ministry of Community and Social Services.

[2] This list excerpted from the website of the Ministry of Community and Social Services.

What tax considerations are there for ODSP?

Benefits received under ODSP are not subject to federal or provincial income tax. From
an income tax return filing perspective, the amount of the benefit is included into income and is then offset by a deduction equal to the amount of the benefit. This could affect the refundable tax credit. As well, it will also affect the status of those persons with a disability who wish to qualify as family dependents. However, if an individual only receives ODSP benefits, there is no income tax payable, and the full amount of the disability tax credit for ODSP recipients eligible for the DTC may be transferred to a supporting family member.